Who Stole Jobs from Detroit?

It might come as a surprise to casual observers that the city of Detroit is filing for bankruptcy. To those seasoned industry watchers, it is an event waiting to happen. Detroit has a prominent place in US history because it is considered “a metonym for the American automobile industry and an important source of popular music legacies celebrated by the city’s two familiar nicknames, the Motor City and Motown.”

Many reasons ultimately contributed to the collapse of city finances but the dominant cause is the loss of jobs in the automobile industries over the decades that was not adequately replaced. A thief can steal your belongings but nobody can steal your job. So where did all the jobs go? It is definitely not China if the mainstream US press is to be believed. I am just sensationalising the title to grab some attention. The fact of the matter is, automobile manufacturing in the US ceased to be centred in Michigan and now spread over a much greater geographic areas across Ohio, Kentucky, Mississippi, Indiana, Texas, Alabama, North Carolina etc.

Nevertheless, you would be very surprised if I tell you that Detroit is the number one port of import of automobiles into the US. Around 20% of the 14.5 million new light vehicles sold in the US were built overseas and imported into the US. Here’s a short take of the 2012 figures:

Detroit, MI: 1,182,142

Loredo, TX: 606,966

Brunswick, GA: 483,719

New York/New Jersey: 426,943

Buffalo, NY: 407,131

Port Huron, MI: 406,658

Eagle Pass, TX: 379,072

San Diego, CA: 328,723

Baltimore, MD: 323,200

Jacksonville, FL: 288,030

For more detail: http://blog.caranddriver.com/port-authority-a-comprehensive-look-at-where-imported-vehicles-enter-the-u-s/

For those who has long memory, the case of Vincent Chin comes to mind. He was beaten to death by two disgruntled laid off auto workers in Highland Park, Michigan (which is located in Detroit). They accused him of being Japanese and he was killed for allegedly stealing jobs from American.

We have heard of how jobs were off shored to third world countries like China, Mexico etc. The only developed countries that was singled out was Japan in the 1980s but the voice died out after the collapse of Japan’s stock and property market.

I find it very ironic that Detroit actually has become the number one port of entry of vehicles to the US. It used to be the premier based of auto manufacturing. As you can tell from the figures, more than half of vehicles import into the US comes in through Detroit, Port Huron, Buffalo from Canada with Detroit accounting to one third the total figure. The rest of the import are mostly from Germany and Korea.

These manufacturing jobs are high paying jobs paying around $35-50/hr. Why are the politicians and press silent on these issue? The Japanese, Canadian, German and to a lesser extent Korean pay are comparable to US workers, so if employment can be stolen it should be these jobs. What is happening in Detroit has been going on for years but now it finally got the press it receive, will the situation be solved?

@Allen
Thanks for the barrage of critical questions. Have you ever read US news report of Canada stealing jobs from the US? Of course not, also never from Germany, right? Here’s what I am trying to get at.

My point is, Detroit’s job lost in auto manufacturing was never made up adequately by new jobs creation. This is the one major cause of the collapse of Detroit’s city finance, another big cause is mismanagement. However, the big question is why did those manufacturing jobs leave Detroit in the first place and settled in other parts of the countries, plus north and south of the border? Figuring out the reasons of the jobs movement is a key part in understanding global economics.

My article is more aim at generating a discussion and getting more questions. Article was updated with some responds to Allen.

I see… I think it would be helpful to add more context. For example, even though I am aware of Vincent Chin, I didn’t make the connection when first reading the post … and I am a Chinese American!

About your bigger questions … about globalization, global economics, etc., that definitely is a big question. While taking MBA classes, I read several books on Silicon Valley – what makes it enduring, innovative, etc. Eventually there are theories about ecosystems of culture, of businesses, of technological abilities, people – what makes it so hard to duplicate. The question you ask is even more complicated – for your question encompass not just what defines a regional economy, but also about ecosystems of regional economies.

On the question of who took away the jobs … I think HH should definitely devote more time on it. It is the basis of protectionism that is sweeping not just America, but Europe as well…

I think the problem of Detroit may started with the decline of auto industry but more related to white flight of inner cities. The Big Three have been in revival in the last few years but are no help to Detroit. GM is the only one headquarters in Detroit, and totals only 1 or 2 assembly lines in Detroit. Detroit has lost 1 million residents in the last 40 years, and with it the tax base and property value declines. The transformation of high paying blue collar workers with good benefits to low paying service workers are happening all over U.S. and Detroit is only a symptom of financial capitalism. The pace of automation and replacing workers with computers are continuing not only in manufacturing but in service areas too. Profit as a determining factor in America will be the downfall not only in Detroit but other cities.

It is set in Milwaukee, which used to have heavy industries. It didn’t have a “white flight”, but still saw gradual declines since the 1980’s. The jobs lost in manufacturing simply did not come back at all.

It floated out to Japan, Mexico, China, and just kept floating around to keep the labor cost down.

*I personally experienced some of this “top level squeeze profit out of bottom” kind of change in Western labor.

Companies are now more and more concerned about ever more higher profits and stock prices, with little regard for keeping a strong viable work force.

Henry Ford was thought as insane when he offered higher salaries for his workers, because he thought if he paid more for his workers, they could all buy his cars too.

Whether that worked or not, it propelled US industries to set higher standard of living for their workers.

Another reason: Back in the old days, it was hard to train a good worker, and you didn’t want to lose trained workers. Workers were considered a valuable asset of the companies.

Nowadays, workers are just numbers. Automations and technologies make it easier to replace workers, thus workers have less and less bargain power.

This is inevitable.

So the answer to Allen’s question of who took the jobs from Detroit (or anywhere else), Machines did.

1 way or another, technology made it possible for corporations to value workers less and less. Then manufacturing jobs simply became less valuable. The old valuable manufacturing jobs disappeared, replaced by new less valuable manufacturing jobs that eventually shifted out to other places (some in other parts of US).

*It’s not really about HOW MANY jobs any more. It’s really about the value of work force compared to the value of technologies of a company. Over time, the value of the work force declines relative to the value of the technologies.

Companies may still have the same number of workers over time, but they would be paid less and less on the average.